We need a new approach to health funding and the answer lies in reforms already made in the field of social care. To tackle many of the painful and apparently insoluble problems of the National Health Service we should give every individual patient control over tax-based funds.

We should extend the principle of social care “personal budgets” into every nook and cranny of health services. We should all hold tax-funded, lifelong health savings accounts as I propose in my new Institute of Economic Affairs book, Who Decides Who Decides? Enabling Choice, Equity, Access, Improved Performance and Patient Guaranteed Care, published last week.

Gordon Brown has invested another £520m in the social care “personal budgets” project this year. This three-year initial programme is transforming social services for older and disabled people by extending personal budgets – already held by the disabled – to those in social care at home. Some 80,000 people can now buy the care they prefer.

What a shock to the complacent NHS if every service-user could say: “Thanks, but no thanks, I think I’ll go round the corner to the other provider.” And take their tax-based fund with them.

This change would let loose at last the real power of direct economic incentives. It would make a reality of choice. It would impact on quality – especially attitudes to patients. It would bear down on costs. It would prompt new suppliers to come into the picture. It would say to the NHS: “Get going on change and improvement. There is no way back.”

Personal budgets could give the NHS the shake-up it needs. This has not been achieved by pouring more billions into it. Personal budgets are the most radical social reform we have seen. Their wider implications for the NHS are revolutionary.

If the elderly, the chronically ill and the disabled can control the money – and they may have been foolishly thought by some to be among those less likely to be able to cope – then why not all of us and for all services?

There is a whole range of things which affect people’s wellbeing that are now being addressed by a new emphasis on personal self-organisation rather than administrative control or “being cared for”.

In one example a man who was isolated and seriously overweight said that rather than going to exercise classes and a day centre, having a dog would help him. He was provided with Sid – a social inclusion dog. This sounds amusing but it is serious. It opened up his life. Sid helped an isolated, dependent person to have loving and loyal companionship, including that of other dog-owners he met when he went out for walks every day.

Many other examples of the use of personal budgets have illustrated how care providers can now respond to specific individual concerns. For the individual it is infinitely better than popping a pill or going to the surgery.

One personal budget holder reported that 36 people used to visit him for assessment and service activities. Now it is five. Not only is this about improving lives by people improving them for themselves, it is also about encouraging greater staff satisfaction in achieving personal and customer fulfilment. This, too, is changing quality standards and shifting purchasing to help to maintain an individual’s independence over time.

Lord Darzi’s final report on the future of the NHS gave personal care budgets to another 5,000 sufferers of chronic conditions such as diabetes and multiple sclerosis. West Midlands strategic health authority is also piloting extending such budgets into all chronic care. And Brown told health professionals gathered at King’s College last autumn that 100,000 people with long-term conditions should be given the ability to manage their care themselves. Why not go much further?

There can surely be no case for treating the NHS differently. Personal budgets are already encouraging competing private provision in social care. They are freeing from mystification both prices and individual choices. People are rebelling against the poor services previously provided by local authorities.

The government talks a lot about choice and personalised services. People holding personal budgets say they have changed their lives in many positive ways. These individuals, their families and others like them have found that the budget arrangements need not be complicated. They have successfully handled the arrangements for payments, National Insurance contributions, personal liability insurance, PAYE etc.

As we struggle to make the NHS work properly, it surely makes sense to provide individuals with personal budgets. With the working classes suddenly given control of money, they can be on the same basis as the middle classes who can write cheques or articulate their needs better and escape poor NHS services.

John Spiers is health policy fellow at the Institute of Economic Affairs

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